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2020 (1) TMI 151 - AT - Income TaxUnexplained cash credits u/s 68 - HELD THAT:- We notice from a perusal of the assessment order although the Assessing Officer’s show-cause notice proposed the said purchases to be treated as bogus, he neither asked for proof of genuineness of assessee’s opening stock nor did he issue section 131 or 133(6) process on the assessee’s supplier to this effect. His assessment order nowhere holds that either of the two components i.e. opening stock and purchases are not correct. The very factual position has continued in the CIT(A)’s above extracted lower appellate discussion as well. We hold in this factual backdrop that the assessee duly proved its saree stock during the relevant previous year amounting to ₹ 1,36,77,207/- as per its books of accounts including fabric stock of ₹ 1,03,87,762/-. The survey authorities had sought to physically verify the assessee’s stock of sarees on 18.01.2012. They could not find any such stock item at its premises. The only inference that could be drawn in such circumstances is of clandestine sales by disposing off sarees/fabrics out of books only forming source of the impugned cash deposits. We thus direct assessment of the impugned bank deposits @8% only. This former issue is partly accepted in assessee’s favour. Disallowance of interest paid to the bank - HELD THAT;- We find no merit to sustain the impugned disallowance. The fact remains that the assessee has advanced interest-bearing funds to its sister concerns only. This is not the Revenue’s case that the same lacks the element of commercial expediency between two sister concerns as per hon’ble apex court’s landmark decision in S.A. Builders Ltd. v. CIT [2006 (12) TMI 82 - SUPREME COURT] & Hero Cycles Ltd. vs. CIT [2015 (11) TMI 1314 - SUPREME COURT] . We draw support therefrom to conclude that the assessee’s act of advancing interest bearing funds to its sister concern involved commercial expediency and therefore, the impugned pro rata interest disallowance cannot be sustained. The same stands deleted.
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